Nee Gee Enn & Sons Vs Union of India & Ors. (Supreme Court of India)
The dispute concerns Cross-LoC barter trade conducted on the Srinagar-Muzaffarabad and Poonch-Rawalakote routes pursuant to the Confidence Building Measures between India and Pakistan and the Standard Operating Procedure issued by the Government of India on 20th October 2008. The arrangement permitted specified goods to be exchanged between traders on the two sides of the Line of Control without exchange of currency. Under the earlier J&K VAT regime, Cross-LoC trade was treated as zero-rated. After introduction of GST in Jammu & Kashmir with effect from 8th July 2017, however, there was no corresponding provision expressly continuing that treatment.
The GST authorities investigated Cross-LoC transactions undertaken during 2017-18 and 2018-19 and alleged that the traders had neither disclosed the inward and outward supplies in their GST returns nor discharged GST. Show cause notices were consequently issued under Section 74(1) of the CGST Act, 2017 read with the J&K GST Act. The traders approached the Jammu & Kashmir High Court under Article 226 contending principally that the notices lacked jurisdiction.
In New Gee Enn & Sons Vs Union of India & Ors., the High Court examined six questions concerning the nature of Cross-LoC trade, applicability of Sections 73 and 74, limitation, clubbing of financial years, taxation of barter transactions and availability of the statutory appellate remedy.
The High Court held that the Cross-LoC transactions were intra-State supplies. It considered the definition of “intra-State supply of goods” under the CGST Act read with Section 8 of the IGST Act, the definition of “India” under Section 2(56) of the CGST Act, Article 1 of the Constitution and the definition of “State” under the J&K GST Act. Since the area under the de facto control of Pakistan was treated as part of the territory of the erstwhile State of Jammu & Kashmir for this analysis, the Court concluded that the location of the suppliers and place of supply were within the same State. The petitioners’ Senior Counsel also conceded before the High Court that the nature of the trade indicated that it was intra-State rather than import or export trade.
The traders argued that the proceedings properly belonged under Section 73 rather than Section 74 because the requirements of fraud, wilful misstatement or suppression were absent. The High Court examined the show cause notices and found that they alleged non-disclosure of the transactions, failure to discharge tax under the self-assessment mechanism and failure to cooperate with the investigation. It therefore considered the notices prima facie capable of falling within Section 74, while expressly leaving final adjudication of that issue to the proper officer on the evidence and replies submitted by the traders.
The High Court also rejected the limitation challenge. On clubbing of periods, it held that the CGST/J&K GST enactments contained no prohibition against one composite notice covering multiple financial years. Such a notice could stand where the demand period was identified, limitation was satisfied, allegations were specific, year-wise quantification was furnished and no prejudice or violation of natural justice resulted.
The High Court relied on Whirlpool Corporation vs. Registrar of Trade Marks and M/s. Radha Krishan Industries vs. State of Himachal Pradesh while distinguishing maintainability of a writ petition from the discretionary question of entertaining it when an efficacious statutory remedy exists. Having rejected the jurisdictional objections at the threshold, the Court declined to entertain the petitions and relegated the traders to the remedies available under the CGST Act.
For cases where no reply to the Section 74 notice had been filed, four weeks were granted for filing replies and the proper officer was directed to conclude proceedings within three months thereafter. Where final demand orders had already been passed, three months were allowed for appeals under Section 107. Importantly, the question whether, in a barter transaction involving exchange of goods of equal value, an assessee could be taxed both on outward and inward supplies was expressly left open for determination by the GST authorities. The Court further clarified that its observations on merits were only prima facie, except for the legal questions determined by it. (TaxGuru)
The High Court judgment was thereafter carried to the Supreme Court in Nee Gee Enn & Sons Vs Union of India & Ors. The Supreme Court order supplied for the present summary is confined to two directions:
Thus, at this stage, the Supreme Court has issued notice and directed that the matter be tagged with SLP (C) Diary No. 1429 of 2026. The supplied Supreme Court order contains no substantive adjudication of the High Court’s reasoning, no recorded submissions of the parties and no final ruling on whether Cross-LoC barter trade is taxable as intra-State supply, whether Section 74 is attracted, whether composite notices covering multiple financial years are valid, or the tax consequences of the barter mechanism.
On the material supplied, the Supreme Court has not stayed, reversed, modified or affirmed the Jammu & Kashmir High Court judgment. Its order merely issues notice and tags the matter with the connected SLP. Accordingly, the substantive conclusions presently available remain those recorded by the High Court, while the challenge to that judgment is now pending consideration before the Supreme Court.
Read also Order: Cross-LoC Barter Trade With PoK is Intra-State Supply: J&K HC
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Issue notice.
2. Tag with SLP (C) Diary No. 1429 of 2026.
